UPDATE 1-Hot, dry weather pushes up Brazil's inflation in mid-March

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By Silvio Cascione
BRASILIA, March 21 (Reuters) - Brazil's inflation quickened
in the month to mid-March as hot, dry weather in the country's
most populated areas reduced crops and pushed up food prices,
government statistics agency IBGE said on Friday.
Brazil's IPCA-15 consumer price index rose 0.73
percent in the month to mid-March, in line with median market
expectations in a Reuters poll. The IPCA-15 index had increased
0.70 in the previous month.
Food prices rose 1.11 percent from mid-February. Tomatoes,
which became a symbol of another food price shock in early 2013,
were 28.5 percent more expensive, while potatoes and fresh herbs
increased over 10 percent from the previous month.
Higher food costs are adding to several other price
pressures that are nudging inflation toward the ceiling of the
central bank's target range, which could pave the way for
further interest rate hikes despite fragile economic growth.
Transportation costs rose 1.22 percent, driven up by a steep
27 percent increase in air fares. Ethanol fuel prices gained
nearly 4 percent, IBGE said.
INFLATION FOCUS
Although policymakers see the increase in food prices as
temporary, the central bank will probably act to make sure the
surge does not have any lasting effects on inflation, the bank's
president, Alexandre Tombini, said on Tuesday.
Brazil's central bank targets inflation at 4.5 percent, plus
or minus two percentage points. It has jacked up interest rates
by 350 basis points since April last year to 10.75 percent
, and is widely expected to raise borrowing costs at
least once more, in early April.
Hot weather and sparse rains also lowered water levels in
reservoirs at key hydroelectric dams, raising the threat of
water and energy rationing and potentially increasing
electricity costs, especially next year.
Gasoline prices are also expected to increase this year and
next, and low unemployment is likely to continue fueling
services inflation, economists say.
March February
- Food and beverages 1.11 0.52
- Housing 0.44 0.64
- Household articles 0.60 1.17
- Apparel 0.19 -0.68
- Transport 1.22 -0.09
- Health and personal care 0.46 0.75
- Personal expenses 0.78 1.19
- Education 0.53 6.05
- Communication -0.66 0.17
- IPCA-15 0.73 0.70
(Reporting by Silvio Cascione; Editing by Sophie Hares)